NCL's F3 Delayed?

September 17, 2008

A news report today by Cruise Week, an industry publication, warns of a significant dispute between Norwegian Cruise Line and Aker Yards France, the shipyard that's building NCL's innovative new F3 series of ships.

The dispute, according to the report, could cause major delay in the delivery of the first of two as-yet-unnamed ships. The 150,000-ton, 4,200-passenger F3 is considered one of the most innovative designs ever with already announced features that include "new wave" staterooms; nightlife options that mimic Miami's ultra-exclusive South Beach clubs; the first at-sea Ice Bar; and Spice H20, a combo pool deck, dining venue and outdoor theater. And all outside cabins come with balconies.

The first F3 ship was slated for delivery in March 2010; the second scheduled to launch that October. The keel laying of the first vessel took place on April 24th.

A Difficult Project
No question, the design and building process for NCL's F3 has been more complicated than most new-build projects. That's partly due to the ship's innovations. But while the above features represent different approaches in cruise ship design, what's also challenging is dealing with what F3 ships won't have. In an effort to build on its "freestyle" mantra, NCL has eliminated a theatrical showroom and main restaurant venues. There's no lido buffet.

Therein lie big enough challenges. But there were others, and this is perhaps what's led to the dispute. The order was originally placed by Star Cruises, NCL's parent company, for the two ships (with an option for a third). Then it was announced that the ships would be moved over to NCL. And then in a major move in August 2007, Star Cruises essentially sold half of NCL to Apollo Management, LP, a private equity group. And Apollo had its own ideas about design and features for the new ships, which necessitated many trips back to the drawing board. That becomes frustrating to shipbuilders -- and expensive for cruise lines.

What's Next?
In Cruise Week's report, NCL issued a statement that basically said "NCL Corporation Ltd., in response to reports that one of its subsidiaries may be involved in a contractual dispute with Aker Yards S.A. of France regarding a shipbuilding contract, will not comment on commercial or legal disputes."

Emphasizing that the dispute centers only on the first ship of the two-ship new-build project, industry sources have told Cruise Critic that it's quite possible that Apollo has gotten cold feet. It's also possible, sources said today, that Apollo is willing to take a loss on the project -- which construction-wise is still in its infancy -- by paying a $200 million penalty, rather than having to go through with the first F3, priced at $1 billion or more.